Tax Talk: Tax technology is the new normal

Recent initiatives taken by the government conveys the message that it will improve the tax administration by making the system simple and technology-driven.

Recent initiatives taken by the government conveys the message that it will improve the tax administration by making the system simple and technology-driven. Electronic filing of return, digital signing of return for companies, electronically uploading the Form 3CEB, Form 3CD, Form 3CA, electronic verification system making the return filing process absolutely paperless are some of the initiatives taken by the government in this direction.

Recently through eSahyog, the government has launched paperless initiative of Central Board of Direct Taxes (CBDT) under which notices to the assessees would be sent to their emails. This initiative will encourage the tax department to work in an e-environment and reduce the need for the taxpayer to physically appear before tax authorities. The assessees will be informed by SMS and email about the mismatch and then they can log in to e-filing portal to see the mismatch.

In order to legislate eSahyog, CBDT has amended the Income-tax Rules, 1962 by inserting a rule which provides that the notice, summons, requisition order and other communication under the income-tax act may be served on the electronic mail or electronic mail message of the assessee appearing in any of the following records of the tax department:

(i) the email address available in the income-tax return to which the communication relates; or

(ii) the email address available in the last income-tax return furnished by the assessee; or (iii) in the case of assessee being a company, email address of the company as available on the website of Ministry of Corporate Affairs; or (iv) any email address made available by the assessee to the income-tax authority or any person authorised by such income tax authority.

It is evident from such initiatives by the CBDT that the government has realized the need to operate in a digital world. However, they are equally concerned about the associated risks, and are insisting on reports/certificates from professionals such as chartered accountants on the veracity of the uploaded information. With the tax world becoming tech-savvy, tax technology is the new normal.

Impact of tax technology

Tax technology would bring a landscape change in the corporate culture. The new tax technology can help develop a corporate culture that embraces technology and looks for ways to optimise or drive value through the adoption and application of tax technology.

As demands grow on the tax department and staffing remains lean in the overall corporate landscape, the need to become more efficient and better focused expands. Companies that aim to leverage technology to relieve constraints will be better positioned than those that look solely at human and resource-based solutions.

Demand for tech-savvy professionals

Embracing emerging technology is now vital to any company or a professional who wants to stay relevant and competitive within the industry.

This means adopting a culture of continuous professional development in the latest tax applications and software, keeping pace with emerging best practices, and proactively seeking self-education and certification in key areas. The companies shall start hiring financial professionals who are not only adept with numbers, but are also proficient in technology. Putting talented, forward-thinking and tech-savvy tax specialists on their teams would give these companies a clear advantage during tax season and all year long.

The implications for privilege and confidentiality must be closely evaluated as tax executives consider the speed and scope of their migration to and emphasis on technological innovation. Standards for ensuring secure transmission of electronic communication and formulating and implementing appropriate security, archival and retrieval policies in relation to such communication, need to be put in place.

The writer is executive director, Nangia & Co

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